PHOTO: Buyers and sellers in an average home sale are set to pay around $200 more on the new system. (Pixabay: mohamed_hassan)RELATED STORY: What the Landgate sale means to home buyers, sellers and the GovernmentRELATED STORY: How e-settlements divided an industry arguing over costs for buyers and sellersRELATED STORY: E-conveyancing plans ‘could lead to higher costs for buyers and sellers’
Buying a house? Selling a unit? If you live in Western Australia, being on either side of a property deal is about to cost you more.
On December 1, Western Australia will adopt electronic conveyancing — or e-conveyancing — for most property settlements, using the online platform Property Exchange Australia (PEXA).
WA is only the second state, behind Victoria, to mandate the use of PEXA.
But what does this mean for consumers?
What is PEXA?
PEXA is the only online property exchange platform used in Australia.
It was developed in 2010 following a Council of Australian Governments (COAG) directive to create a single, national property settlements system.
New South Wales and South Australia also use PEXA, but unlike Victoria and WA, it is not compulsory in those states.
PEXA’s original shareholders — including the WA Government — sold the business earlier this month to a consortium of companies for $1.6 billion, after a share market float fell over.
How will my property settlement change?
From tomorrow, all eligible property transactions in WA will be processed online, instead of manually.
Settlement agents will lodge land title documents with Landgate electronically, rather than in person.
Landgate’s registrar of titles, Jean Villani, said the change would benefit all parties.
“The gap between settlement and lodgement of documents is reduced because in the electronic environment it occurs simultaneously, reducing the risk and increasing the security and integrity of the titles register,” she said.
What are the benefits for consumers?
Proponents of the PEXA system say it will deliver faster and more accurate settlements.
Under the current manual system, 25 per cent of settlements fall over, according to PEXA — with human error in processing paperwork taking some of the blame.
In May, a Deloitte Access Economics report, commissioned by PEXA, found electronic processing had “on average” reduced the incidence of delayed settlements.
Agents had reported fewer postponements, the report said, allowing buyers to set dates for moving properties with “greater certainty”.
There are also financial advantages for sellers.
“One of the big benefits is no bank cheques, so if you are selling, you get cleared funds into your account very quickly,” Ms Villani said.
But what about the cost?
PEXA charges $112.64 to transfer a single title, which the conveyancing industry says will be passed on to consumers.
In addition, there are fees for:
- Registering a mortgage ($42.24);
- Discharging a mortgage ($20.46); and
- The imposition or withdrawal of a caveat ($15.84)
While estimates vary, LJ Hooker Settlements WA owner Janet Hryb predicts buyers and sellers in an average home sale will pay an extra $200 for using the PEXA platform.
Meanwhile, Landgate will continue to charge a title transfer fee based on the value of the property, which equates to $261.20 for the average house when based on the median Perth house price of $485,000.
The agency said there were no plans to adjust its fee structure to reflect the change from manual to online settlement.
Under the new system, settlement agents are also involved in stamp duty administration, which was previously done by the Office of State Revenue.
Some agents expect settlement fees will rise to reflect the additional workload, as well as insurance and cyber security costs.
“It’s double the work so we’ll need to double the fees, [but] we are in a very, very tight market,” Ms Hryb said.
However, a report by KPMG in February found settlement agents could save up to 4.45 hours per transaction, thanks to reduced travel time and administrative tasks.
Does this affect all settlements?
Not quite. Some settlements will still be required to be conducted manually.
Deceased estates, bankruptcies and other “complex” transactions will continue to use paper-based processing.
Are there any risks with e-conveyancing?
Earlier this year, a couple lost $250,000 on the sale of their Melbourne home, conducted via the PEXA platform, after hackers breached the email account of one of the conveyancers involved.
PEXA says the hackers were able to create fictitious profiles on its platform and change bank account details to make the fraudulent transfer.
The bulk of the funds were recovered.
In the wake of the breach, PEXA upgraded its security with multi-factor authentication and machine-learning algorithms to detect suspicious activity.
It says in the event of a “specific type of fraud”, sellers will be eligible for PEXA’s residential seller guarantee, which will refund a fraudulent payment within 10 business days.
Ms Villani said Landgate was not concerned about security risks.
“There is much integrity in the system, however those frauds did act as a strong reminder that everyone needs to remain vigilant and adopt the highest ICT security systems they possibly can,” she said.